Lenovo will be in a "very different" situation in terms of profit in the coming quarters as the Chinese technology giant implements a turnaround strategy amid a slowing PC sector and market turmoil in developing countries, the company's president said.
The world's number one PC maker saw profits plunge 51 percent year-over-year to $105 million in the first fiscal quarter, a fall it attributes to "severe challenges" in key markets such as China and Brazil.
But concerns about Chinese growth that has sent stock markets into turmoil recently are not worrying Lenovo as it looks to restructure.
"We are taking all the action in terms of combining things, in terms of taking out certain costs, becoming even more efficient in some other areas. Of course, we are in the process of doing that. We are going to execute within these things," Gianfranco Lanci, president and chief operating officer at Lenovo, said at a roundtable with reporters at the IFA consumer electronics show in Berlin this week.
Lenovo is the world's biggest PC maker with a 20.3 percent market share but it is struggling with a market that will see shipments fall 8.7 percent year-on-year in 2015, according to IDC. On top of this, Lenovo is still continuing to integrate the Motorola business it bought from Google for $12.5 billion last year, and the acquisition of IBM's low end server business.
But Lanci said the company is taking steps to improve profitability in the face of these headwinds. Lenovo is axing 3,200 jobs in non-manufacturing parts of the business that will see it save $650 million in the second half of the year. Lanci said Lenovo was also "optimizing" the product portfolio it offers and streamlining the supply chain to use the same suppliers for its PC and server business. The result will be improved second-quarter results, according to Lanci.
"We are already doing a lot of things you still don't see in terms of impact, because we started these things more or less at the end of Q1 this year. But by the end of this quarter we should be in a very very different situation than before," the Lenovo executive said.